IRS Warns Against Unlicensed Betting Operations Amid Prediction Market Debacle
The Internal Revenue Service (IRS) has issued an advisory warning Americans to avoid unlicensed and cryptocurrency-based betting operations, citing the risk of money laundering and tax crimes. The notice comes as the debate over the legality of prediction markets continues, with state officials and federal regulators at odds over their classification.
The IRS is urging bettors to stick with licensed platforms, particularly during the peak sports wagering season, which begins with football season. According to Jarod Koopman, IRS Criminal Investigation Chief, 'illegal gambling isn't just about placing unlawful bets. Our investigations routinely uncover money laundering and tax crimes tied to illegal gambling operations.'
The advisory also highlights the dangers of cryptocurrency-based platforms that circumvent standard Know Your Customer (KYC) identity checks and financial reporting rules. Several major prediction market operators run on crypto rails, raising questions about their resemblance to offshore sportsbooks.
The Commodity Futures Trading Commission (CFTC) maintains its jurisdiction over these products, arguing they are financial instruments rather than wagers. However, state attorneys general, such as New York Attorney General Letitia James, disagree, labeling them 'gambling platforms, plain and simple.'